Developing a whistleblower policy? 5 key factors you need to consider

5 important considerations in developing a sound whistleblower policy

The consequences for ineffective action on whistleblowing are about to get more severe, and Anthony Wood and Starr Brenton say there are five important considerations in developing a comprehensive whistleblower policy

Since 2004, Australia’s Corporations Act has allowed for private sector whistleblower protections. But, the laws were flawed. On the one hand, they imposed incredibly onerous obligations on recipients of disclosures to maintain confidentiality and prevent victimisation of the discloser. On the other hand, they did not mandate any internal company policies or procedures to ensure those obligations were met. This has left companies in the dark about how to create effective programs for dealing with disclosures – exposing everyone to legal and practical risks.

Take, for example, a senior manager who receives a vague complaint about “unethical decision-making”. What should that senior manager do with that information? Must they investigate? How? What if the complaint was anonymous? The answer to these questions is not straightforward – and it is certainly not intuitive.

Change is coming
In November 2016, stronger whistleblower protections were introduced into the Fair Work (Registered Organisations) Act 2009 (Cth) (FWRO Act) off the back of the Royal Commission into trade unions. As politics goes, soon followed a parliamentary inquiry into corporate whistleblower protections. The purpose of the inquiry was to explore achieving equal or better whistleblower protections in the corporate and public sector as provided for in the FWRO Act.

The parliamentary inquiry released its findings on 30 September 2017. In short, the report drew out the ineffectiveness of the current system to protect whistleblowers and recommended broad reforms. The Federal Government responded with the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (Cth). With the in-principle support of the major parties, the Bill is very likely to be passed by Parliament this year.

“ASX listed or not, the consequences for ineffective action on whistleblowing are about to get more severe”

Why employers need a whistleblower policy
The Bill dramatically changes the law in three ways:

  • First, by significantly expanding the circumstances when an individual will qualify for protection under the Corporations Act. Although employees are (obviously) afforded protection by the Bill, it also protects others like officers, contractors, relatives or dependants of those people, and even individuals who have previously held those positions.
  • Second, by making it easier for ASIC and individuals to bring claims seeking compensation for victimisation, or breach of the confidentiality obligations. For example, by imposing a reverse onus of proof on employers.
  • Finally, by requiring all public companies and large proprietary companies to have a whistleblower policy by 1 January 2019.

The penalties will also be substantially increased. Contraventions can result in imprisonment of 6 months for confidentiality breaches and two years for victimisation. Individuals will be liable for prosecution – not just companies. Moreover, civil penalties can be imposed of up to $200,000 for individuals or $1 million for companies. A mere failure to have a policy is an offence with a maximum penalty of $63,000.

These proposed changes are a clear reaction to the environment we find ourselves in, characterised by a steady diet of high-profile whistleblowers. Another impetus has been the push by G20 countries for Australia to better its whistleblower regime (as part of their 2017–18 G20 Anti-Corruption Action Plan).

The high profile financial scandals culminating in the Banking Royal Commission and the evidence that it has subsequently uncovered will, no doubt, provide further justification for the changes. But it is not just the financial sector that is affected. Whistleblowers come in all shapes and sizes – they exist at charities, construction sites, local clubs, in professional services, schools, multi-national conglomerates, and in every industry.

“The high profile financial scandals culminating in the Banking Royal Commission and the evidence that it has subsequently uncovered will, no doubt, provide further justification for the changes”

ASX listed or not, the consequences for ineffective action on whistleblowing are about to get more severe. Ignorance will not be a defence. It follows that all companies must get their house in order now.

Your whistleblowing policy
To get things started, we set out our top tips for developing a comprehensive whistleblower policy below.

  1. Make sure your policy meets the requirements in the Bill;
  2. Consider when a complaint should be dealt with under the whistleblower policy and when it should be dealt with in accordance with other workplace policies – the key to answering this question will be understanding the definition of ‘disclosable conduct’ under the Bill;
  3. Carefully determine whether your policies and procedures will actually work in practice – the best way to do this is to learn who currently receives serious complaints;
  4. Appointing a whistleblower protection officer and a separate investigation officer is a good basic start. Alternatively, some businesses engage an external whistleblowing complaint service which offer a higher degree of independence in the process; and
  5. Provide training for managers on the obligations under the Bill. Any employee who is authorised to receive complaints must be aware of their obligations of how to deal with it, including the consequences of breaching the confidentiality and victimisation provisions.

Starr Brenton is a solicitor with Herbert Smith Freehills who assists clients in a broad range of employment and industrial relations matters, both in a litigious and general advisory context. She has particular expertise on whistleblower issues including in relation to regulatory and employer investigations, employee claims and developing policies.